44129 THIRD/FOURTH QUARTERS 2007 · World Bank President Unveils New Vision with Eye on the Poor ................................................................................................................................................................................................. 3 · New Interim Strategy for Lebanon Delivers a Quick Financing Package ............................................................................................................................................................................................... 6 · First Fruits of New Strategy: US$100 Million to the Power Sector and an additional US$75 Million in the Pipeline ....................................................... 8 · Recent Economic Developments ................................................................................................................................................. 10 ·Reforming Regulations and Growth: the Investment Climate in Lebanon .........................................................................................................................................................................................................................................14 ·News, Recent and Upcoming Activities ................................................................................................................................ 16 · Bank Group Operations ............................................................................................................................................................................................... 20 ·Recent World Bank Publications ................................................................................................................................................................. 24 Hedi Larbi, Country Director World Bank Address: Tel. (202) 473-3169 - Fax (202) 477-1482 1818 H Street, NW E-mail: hlarbi@worldbank.org Washington, DC 20433 Sophie Warlop, Operations Analyst Tel. (202) 473-7255 - Fax. (202) 477-1482 www.worldbank.org E-mail: swarlop@worldbank.org To Order World Bank Publications: Sabah Moussa, Executive Assistant http://publications.worldbank.org/ecommerce Tel. (202) 473-9019 - Fax (202) 477-1482 For Information on World Bank Programs in Lebanon: E-mail: smoussa@worldbank.org www.worldbank.org/mna/lebanon Demba Ba, Country Manager Chadi Bou Habib, Economist E-mail: dba@worldbank.org Email: cbouhabib@worldbank.org, Tel. Ext: 233 Haneen Sayed, Lead Operations Officer Mouna Couzi, Senior Program Assistant E-mail: hsayed@worldbank.org, Tel. Ext. 229 Email: mcouzi@worlbank.org, Tel. Ext 231 Robert Maurer, Lead Urban Sector Specialist May Ibrahim, Program Assistant E-mail: rmaurer@worldbank.org, Tel. Ext. 224 Email: mibrahim@worldbank.org, Tel. Ext. 245 Sebnem Akkaya, Lead Economist Sophie Urnechlian, Program Assistant E-mail: sakkaya@worldbank.org, Tel. Ext. 225 Email: surnechlian@worldbank.org Robert Bou Jaoude, Senior Financial Management Specialist The World Bank Office in Beirut E-mail: rboujaoude@worldbank.org, Tel. Ext. 230 United Nations House, Sixth Floor Eileen Murray, Senior Operations Officer Riad El Solh 1107-2270 E-mail: emurray@worldbank.org, Tel. Ext. 303 P. O. Box: 11-8577 Beirut - Lebanon Stefano Mocci, Operations Officer Tel. (961-1) 987-800 E-mail: smocci@worldbank.org, Tel. Ext. 237 Fax (961-1) 986-800 Hadia Samaha Karam, Operations Officer www.worldbank.org/lb E-mail: hsamaha@worldbank.org, Tel. Ext. 241 Lina Fares, Procurement Specialist Editorial Team: E-mail: lfares@worldbank.org, Tel. Ext. 244 Sebnem Akkaya Mona Ziade, Communications Officer Anna Bjerde Email: mziade@worldbank.org, Tel. Ext. 239 Chadi Bou Habib Julia Brickell Mona El-Chami, Financial Management Specialist Zeina El Khalil E-mail: melchami@worldbank.org, Tel. Ext. 223 Jamal I. Haidar Diana Masri, Financial Management Specialist May Ibrahim E-mail: dmasri@worldbank.org, Tel. Ext. 238 Haneen Sayed Mona Ziade Zeina El Khalil, Public Information Associate With special thanks to Mary Saba E-mail: zelkhalil@worldbank.org, Tel. Ext. 234 2 Third/Fourth Quarter 2007 World Bank President Unveils New Vision with an Eye on the Poor Robert B. Zoellick has set external main variable spread and fixed spread loan products and internal priorities for his five- has also been reduced by roughly one-quarter percent- year tenure as president of the World age point. Bank Group, unveiling a two-track strategy that focuses on fighting "The World Bank Group can be a much better partner poverty and spurring growth in the with our middle-income country clients, and this is one poorest countries, while integrating of several steps we intend to take to honor that com- the work of the institution's affili- mitment," Mr. Zoellick said in one of a series of public ated agencies under one umbrella. discussions that shaped ideas raised during the World Bank-International Monetary Fund (IMF) Annual Meet- The new President was quick to ings (October 20-22, 2007). makehismarkontheinstitutioninan initiative that underscored emphasis Summing up the expected impact of these two milestones on the poor and a determination to streamline and syn- as he marked his first 100 days in office, Mr. Zoellick ergize the work programs of the World Bank Group's said: "These decisions reflect both our commitment work institutions: International Bank for Reconstruction to IDA, the single largest source of donor funds for and Development (IBRD), International Finance Corpo- many poor countries, and to our middle-income coun- ration (IFC), International Development Agency (IDA), try partners, who have asked us to better serve their Multilateral Investment Guarantee Agency (MIGA) and needs through IBRD. They also show how we are deter- International Center for the Settlement of Investment mined to make IFC grow and to harness its expertise Disputes (ICSID). and resources in promoting the private sector even more effectively in IDA-eligible countries." The World Bank Group's 11th President is a firm believer in the institution's ability to "put its money Mr. Zoellick, a veteran diplomat and international where its mouth is" in pursing its mission: A World banker, came to the World Bank with a commitment Free of Poverty. The first milestone early in his ten- to "inclusive and sustainable globalization." (See Box ure was a record US$3.5 billion commitment to IDA to 1)."Globalization offers incredible opportunities," he enable the agency to provide grants and credits for the said. "Yet exclusion, grinding poverty, and environmen- poorest countries. The IDA 15 package was more than tal damage create dangers. double the US$1.5 billion pledged by the World Bank Group to IDA 14 in 2005. Mr. Zoellick zeroed in on the most disadvantaged. "The ones that suffer most are those who have the least to start Significantly, IFC will be contributing for the first time with ­ indigenous peoples, women in developing coun- to the IDA replenishment, deepening the connection tries, the rural poor, Africans, and their children." between IFC and IDA. In discussing how the World Bank Group could sup- Simultaneously, Mr. Zoellick won the Board of Execu- port developing countries, Mr. Zoellick said: "It is the tive Directors' approval for significant simplification purpose of the World Bank Group to assist countries to and reduction in loan charges for the 79 creditworthy help themselves by catalyzing the capital and policies Low and Middle-Income Countries (MICs). through a mix of ideas and experience, development of private market opportunities, and support for good gov- The new fee structure replaces a six-element system ernance and anti-corruption ­ spurred by our financial to determine a loan's cost, once classified as the most resources." complicated among multilateral development institu- tions. This has been replaced by a small, front-end fee "It is the purpose of the Bank Group to advance ideas and a reduced interest rate spread. The price on IBRD's about international projects and agreements on trade, Third/Fourth Quarter 2007 3 finance, health, poverty, education, and climate change Box 1: Biography so that they can benefit all, especially the poor seeking new opportunities," he said. Robert B. Zolellick is a veteran diplomat and interna- tional banker. He began his five-year tenure as the 11th Mr. Zoellick strongly believes that "inclusive globaliza- President of the World Bank Group on July 1, 2007. tion is also a matter of self-interest. Poverty breeds insta- bility, disease and devastation of common resources and Mr. Zoellick, 53, comes to the Bank from the Goldman the environment." Sachs Group where he served as Managing Director and Chairman of the Board of International Advisors "We should be expanding the frontiers of thinking about from 2006-2007. In 2005-20006, Mr. Zoellick served policy and markets, pioneering new possibilities, not as the Deputy Secretary of the U.S. State Department. just recycling the passably proven with a modest finan- He was the Department's Chief Operating Officer and cial advantage," he said. policy alternate for the Secretary of State. He also had policy responsibilities in a number of areas. From Given the scale of today's challenge, the Bank is a small 2001 to January 2005, Mr. Zoellick served in the player, he said, stressing the need to work with multi- U.S. Cabinet as the 13th U.S. Trade Representative. lateral partners ­ the United Nations and its specialized He forged an activist approach to free trade at the agencies, the IMF, the World Trade Organization and global, regional and bilateral levels, while securing regional development banks. "We must show that multi- support for open markets with the U.S. Congress. lateralism can work much more effectively--not just in Mr. Zoellick worked with Ministers from nearly conference halls and communiqués--but in villages and 150 countries to launch the Doha Development teeming cities, for those most in need," he said. Agenda in the World Trade Organization (WTO) in 2001, and then to complete the framework accord In this context, Mr. Zoellick identified six "strategic for opening markets in 2004. Mr. Zoellick was themes": instrumental in completing the accession of China and Chinese Taipei to the WTO. He also completed · Achieving the Millennium Development Goals in or substantially advanced the accessions to the WTO IDA countries, especially Africa, while addressing of Cambodia, Saudi Arabia, Vietnam, Russia and the need for growth; others. From 1993 to 1997, Mr. Zoellick served as · Working in post conflict countries, guided by the an Executive Vice President of Fannie Mae, the large "Reconstruction" factor of IBRD; housing finance corporation. His other jobs (1985- 1993) included working with Secretary James Baker · Introducing a more differentiated business model for III at the Treasury Department; at the Department Middle Income Countries (MIC) with a competitive of State; and briefly as Deputy Chief of Staff at the menu of "development solutions"; White House. · Assuming a more active Bank Group role in regional and global public goods; Mr. Zoellick graduated Phi Beta Kappa from Swarth- more College in 1975. He earned a J.D. Magna Cum · Advancing development and opportunities in the Laude from the Harvard Law School and an MPP Arab World: "An inclusive globalization must from the Kennedy School of Government in 1981. deliver benefits for all the people in these states," he said; and He has received a number of awards, including: the · Promoting the Bank Group as a "brain trust" of Knight Commanders Cross from Germany for his applied experience to help address the five other work on unification; the Alexander Hamilton and strategic themes and a continuous and rigorous Distinguished Service Awards, the highest honors of focus on results. the Departments of Treasury and State, respectively; the Department of Defense Medal for Distinguished Public Service; and a Doctorate of Humane Letters from St. Joseph's College in Rensselaer, Indiana. Mr. Zoellick has also served on many non-profit boards. 4 Third/Fourth Quarter 2007 To be successful, theWorld Bank Group has to face internal The Bank President said improving governance and challenges, including more client service, stronger ties with overcoming corruption are critical factors to ensure civil society and more effective work with others within the development resources reach the poor who need them. new "architecture of aid", according to Mr. Zoellick. "Stealing from the poor is not acceptable," he said. In addition, he said, "We need to assist staff with better The President has on a number of occasions addressed professional development and improve mobility within staff concerns regarding the Bank's relevance in MICs the organization. We need stronger human resources pol- and its presence in Iraq, among other issues. In terms of icies to support our field staff as we encourage greater MICs, Mr. Zoellick stressed first that 70 percent of those decentralization. And we need greater voice and repre- living under US$2 live in countries that are classified as sentation on our Board and diversity in our workforce." middle-income because they borrow from IBRD. "We can't leave those people out," he stressed. Still, he noted, Mr. Zoellick has praised the recommendations of an inde- the Banks work there is increasingly service-oriented - pendent panel which recently reviewed the work of the countries are taking the capital from the Bank for the Institutional Integrity Department (INT) in the context of knowledge that comes with it. "I see the World Bank as the World Bank Group's governance and anticorruption one of the core multilateral institutions," said Mr. Zoel- strategy (refer to Box 2). The panel, lead by Paul Volcker, lick. "One of the great challenges of our age is how do former US Federal Reserve Chairman, has produced "an we integrate these growing powers into the system...it excellent and most useful report," Mr. Zoellick said. "The would be a mistake to cut them out." Volcker report makes clear the serious challenges ahead in overcoming the cancer of corruption in operations sup- ported by the Bank, and it offers constructive recommenda- tions. Now it will be up to all of us to move forward, as part of our on-going commitment to address this vital issue." Box 2: INT and the Volcker Report Recommendations The Institutional Integrity Department (INT) has the difficult job of investigating fraud and corruption in opera- tions supported by the World Bank Group. It also investigates allegations of staff misconduct and administers the Bank's Voluntary Disclosure Program, which encourages companies to adopt healthy business practices. In an effort to recognize and strengthen the INT's mandate, an independent review panel was created to review this department's work in the context of the World Bank Group's Governance and Anticorruption (GAC) Strategy. The panel, led by Paul Volcker, former US Federal Reserve Chairman, released its report in September 2007, drawing praise from President Robert B. Zoellick. The recommendations aim to improve INT's effectiveness in the following areas: Developing a capacity within INT to disseminate operational advice, lessons learned and best practices resulting from its work; Ensuring that INT findings and recommendations are followed-up in a systematic and comprehensive man- ner, across all units of the Bank; Working with the Audit Committee of the Board to strengthen accountability of INT and consider other steps to assure INT's independence and support; Reviewing and revising, as needed, staff rights in the conduct of investigations of alleged misconduct; Considering the reassignment of investigations of staff misconduct, not involving fraud or corruption, from INT to another office; Developing a policy to ensure that staff members are better informed of the outcomes of investigations of alleged staff misconduct; and Evaluating the Voluntary Disclosure Program after the first year to assess its effectiveness. The Bank has posted the full Volcker Report on its website: http://www.independentpanelreview.com and is seek- ing external comments on these initial proposals. Third/Fourth Quarter 2007 5 New Interim Strategy for Lebanon Delivers a Quick Financing Package The World Bank has approved an Interim Strategy Note conditions. Moreover, the short-term horizon allows (ISN) to guide the institution's medium-term finan- for a follow-up strategy in consultation with the new cial and technical assistance to Lebanon, taking into Government after the presidential elections. Bank man- account the challenges in the aftermath of the summer agement expects to submit a new ISN or a full CAS to 2006 hostilities. This article seeks to shed light on this the Board by December 2008. important development in the World Bank's work pro- gram in Lebanon. The Strategy is anchored in the Government's Medium- Term Reform Program presented to the Paris III con- ference in January 2007. The Paris III Program builds Background on the Government's earlier efforts to launch a reform The ISN is rooted in the four-year Country Assistance program. It is the most comprehensive and feasible pro- Strategy (CAS) for Lebanon, which the Bank concluded gram presented to date in Lebanon. Despite the politi- in December 2005. The ISN became necessary after two cally charged environment, the reform drive has gath- supervening events fundamentally changed the under- ered momentum with the first steps toward its imple- lying economic and political context, rendering certain mentation already underway. The ISN outlines a tran- CAS assumptions and projections untenable: the sum- sitional framework of technical and financial assistance mer 2006 conflict with Israel and the political impasse to contribute to this early effort and its advancement. that has prevailed since December 2006. These devel- It emphasizes the medium-term public expenditure and opments had a negative impact not only on economic social reform agenda, with emphasis on the energy sec- growth and fiscal performance during 2006, but also on tor, social protection and private sector-led growth. It is the medium-term economic prospects. Consequently, widely understood in Lebanon, and by the international the Bank revisited and reframed its assistance strategy community, that because of their service deficiencies in light of the new realities in Lebanon. and fiscal drain, quick and demonstrable reform actions in the energy and social protection areas are the essential first steps for: (i) launching the process of a transition The ISN builds on the analytical and advisory activities to fiscal sustainability in the medium term; (ii) garner- that were carried out by the Bank in close collaboration ing support for the Government's growth and social with the Government of Lebanon and key stakeholders reform agenda; and (iii) galvanizing donors to disburse in Lebanon following the summer 2006 hostilities. These their Paris III pledges to underpin reform implementa- include the Economic and Social Impact Assessment tion. Therefore, this ISN is focused on reforms which (ESIA) that analyzed macroeconomic and sector devel- are critical priorities and constitute key elements of the opment challenges in the aftermath of the hostilities and initial reform phase. outlined sector reform priorities. In addition, the Bank's Trust Fund for Lebanon (TFL), which was created with a transfer of US$70 million from the Bank's surplus in Wide Support for Reform early September 2006, has helped rehabilitate damaged infrastructure and provided technical assistance for jump- Despite ongoing political instability, there is an exist- starting economic activity. The TFL is also providing ing broad consensus in Lebanon on the need for reform. capacity building to advance critical components of the This support needs to be maintained and encouraged. reform program in the areas of distinct Bank compara- The initial reform steps will be advanced in the short tive advantages, such as social protection, energy, expen- term, both through the technical and financial assistance diture management and private sector development. envisaged in the ISN, and through support from other donors. The proposed combination of first action reforms will, in turn, increase the chances for the Government's Strategy to Accommodate Uncertainty comprehensive reform program to gain momentum and be phased-in over time. The ISN stresses the importance The ISN has a relatively short lifespan of 12 to 15 of facilitating wide-ranging structural reforms by first months due to the uncertain political and economic 6 Third/Fourth Quarter 2007 addressing the currently inefficient social protection adjust its reform priorities. It will also help Bank staff agenda and reversing the fiscal drain and service decline report back to Management on accomplishments and in the energy sector. In the past four years, the Bank has outcomes during the ISN period and recommend future developed deeper knowledge in these sectors and has framework for engagement. played a leading role in the dialogue on reforms. Risks and Mitigation IFC and the Private Sector While the Bank's stepped-up financial support is pro- The International Finance Corporation (IFC), the private posed on the back of the Government's bold program sector arm of the World Bank, has significantly increased of reforms and macroeconomic policy measures pre- its activities in Lebanon in response to post-conflict sented at Paris III, the overall risks surrounding the needs and in support of the Bank's ISN. To underscore outlook must be recognized. The outlook in Lebanon is confidence in Lebanon's private sector, the backbone indeed susceptible to risks which can be disaggregated of the economy, IFC has pledged US$250-275 million. into three broad sources, all closely intertwined and dis- Most of the funds are already committed to a number cussed in depth in the ISN. They include: (i) political of investment climate, privatization and investment risk (domestic and regional) and related security risks; (ii) coverage and promotion activities. The program has the macroeconomic and financial risks; and (iii) risks of a twin objectives of supporting the immediate needs of the stalled reform program. private sector in recovery and assisting the Government of Lebanon with the implementation of the necessary Some of the above risks could be partially mitigated by: administrative reforms to reduce the obstacles to private (i) focusing the Bank's financial assistance during this sector entry and operation and bring Lebanon closer to upcoming period of uncertainty on the most reward- regional and international best practices. To comple- ing fiscal and social components of the Government's ment the Bank's early energy sector reforms, advisory program; (ii) emphasizing timely implementation of services to the Government on an Independent Power macroeconomic stabilization measures and irreversible Producer (IPP) have been agreed. reform actions; and (iii) intensifying the Bank's effort to build future capacity for reforms through analytical and advisory activities. An early engagement by the Bank in Government Monitoring and the development and implementation of a social protec- Evaluation Process on Track tion strategy could help enhance consensus around the reform program and provide an additional mitigation The Government of Lebanon has instituted a monitor- instrument. In addition, the Bank will play an impor- ing, evaluation and coordination system to facilitate tant catalytic role in assisting the implementation of the implementation of the reform program. This will help in program. Finally, it is hoped that Lebanon's thriving evaluating Lebanon's readiness for a return to a standard banking sector would voluntarily participate in efforts assistance framework. The coordination of cross-cutting to stabilize the Government's debt dynamics and pro- reforms is undertaken through three specialized Inter- vide its own important burden sharing and risk mitigat- Ministerial Committees addressing economic, social and ing contribution. infrastructure and privatization pillars of the program. The structure is aimed at strengthening the ownership and sustainability of the reform program and is already showing encouraging improvements in this respect. The For more information, contact Ms. Sebnem Akkaya, Bank's current and proposed lending and non-lending Lead Economist, sakkaya@worldbank.org services provide an additional monitoring instrument. The ISN proposes Development Policy Loans (DPLs) that lay out a sequence of reforms consistent with the Government's program. While it is recognized that, in the limited timeframe of the ISN, progress may not be achieved in all dimensions of the economic reform pro- gram, monitoring and evaluation of the progress under DPLs, as well as through the Government's own moni- toring system, will help measure what is working and what is not. This information will help the Government Third/Fourth Quarter 2007 7 First Fruits of New Strategy: US$100 Million to the Power Sector and US$75 Million in the Pipeline OnavisittoLebanoninSeptember2007,theWorldBank's Vice President for the Middle East and North Africa Region Daniela Gressani signed the first Reform Imple- mentation Development Policy Loan (RIDPL) of US$100 million. The Loan is dedicated to reforming the energy sector, as detailed in the previous issue of the Update. Another US$75 million is in the pipeline for Emergency Social Protection Implementation Support (ESPIS). What is a Development Policy Loan? Development policy-based lending is part of the funds committed at the International Conference for the sup- port of Lebanon, or Paris III. At the time, the World Bank committed US$700 million in financing to sup- port the Government's reform program. The RIDPL, which aims to accelerate medium-term reforms in pub- lic expenditure and the social and energy sectors, comes at difficult political, economic and financial times. But, its framework is seen by both the Bank and the Govern- Gressani, MENA VP, at the DPL signing ceremony ment as an appropriate instrument to address policy and amounting to 20 percent of Government revenues and institution-building challenges identified in the Paris III about 3.3 percent of GDP in 2006. A fiscal impact anal- Reform Program. The RIDPL gives the Government of ysis of the Government's energy reform program, pre- Lebanon access to the Bank's technical expertise while sentedandsupportedunderthefirstRIDPL,indicatesthat leading the reform agenda. The RIDPLs would be sin- reforms will have substantial savings over time, halving gle-tranche operations anchored in medium-term sta- subsides to the sector by 2010. Against this background, bilization and sector strategies. This encourages quick the first RIDPL outlines a macro-fiscal consolidation implementation of key initial reforms, while providing path consistent with the Government's reform program both sides with flexibility to adjust to changing circum- and the path presented in this ISN. It discusses in more stances with respect to the next phase. A programmatic detail the steps needed to contain the 2007 fiscal deficit series of RIDPLs could be considered under the frame- and initiate the important structural reforms articulated work of a new Interim Strategy Note (ISN) or Country in the Paris III Program. The Government's expected Assistance Strategy (CAS). In addition, the RIDPLs are actions towards future reduction of the fiscal deficit and sequenced so as to limit exposure in case of any unfore- public debt ratios in the coming months would include seen political or economic changes. the initiation of the privatization program and energy reforms, and active preparation/implementation of the Energy and Reform expenditure and tax policy reforms which are expected to be phased-in as of 2008. Donors are also encouraged The first RIDPL focuses on initial steps in energy reform to disburse their Paris III pledges in a timely fashion. In and select areas of the Paris III agenda that are part of the addition, the social insurance reform agenda is expected broader fiscal adjustment program. The energy sector has to gradually eliminate the Government's implicit liabili- for years been marred by weak management and admin- ties and generate fiscal space by reducing reliance on istration, and a highly inefficient power infrastructure. budgetary transfers over the medium to long term. The This has resulted in unreliable electricity supply, low con- first RIDPL is based on the Government's commitment sumer confidence in the utility, inadequate cost recovery to the Paris III agenda as demonstrated by satisfactory and considerable dependence on budgetary subsidies, performance through much of the year. 8 Third/Fourth Quarter 2007 Social Reform The project will: (i) improve the control of expenditures and revenues within the NSSF, as well as the quality of The second RIDPL for Emergency Social Protection services, by setting up an electronic claims processing Implementation Support (ESPIS) focuses on the imple- and a utilization control system and a registration and mentation of select areas of the Government's social contributions collection system; (ii) ensure financial reform agenda. The objective of the EPSIS is to acceler- sustainability of the NSSF by identifying the needed set ate and improve the quality of the implementation of the of reform measures to control expenditures and optimize package of social sector reforms presented by Lebanon revenues; (iii) improve the poverty focus of existing or at the Paris III donor conference in the areas of social new safety net programs in MOSA by developing and insurance, safety net, and health expenditures. This piloting a new targeting mechanism; and (iv) control will be achieved through the provision of implemen- health expenditures by the MOPH through establish- tation support and capacity building for the National ing a utilization review function, developing of hospi- Social Security Fund (NSSF), Ministry of Social Affairs tal admission criteria and protocols, implementing hard (MOSA), and Ministry of Public Health (MOPH). Over ceilings on contracts with private hospitals and realign- the medium term, the set of reforms supported by this ing MOPH coverage towards more cost-effective health project will be expanded in order to ensure the transition services and hospital facilities. These activities will be to a social protection system which provides adequate achieved through the provision of implementation sup- income protection and security to all population groups, port to the NSSF. while ensuring financial sustainability and equity, and minimizing economic distortions. For more information, contact Ms. Haneen Sayed, Lead Operations Officer, hsayed@worldbank.org Third/Fourth Quarter 2007 9 Recent Economic Developments The unsettled political and security context that has months of 2007 compared to the same period a year prevailed since last summer's conflict with Israel has ago. The Coincident Indicator of the BdL showed prevented the economy from recovering. Real GDP signs of moderate recovery during the First Quarter of is expected to grow by only 1 percent during 2007. The 2007 (Q1-07), but then retreated so that by June 2007 coincident indicator of Banque du Liban (BdL) declined it had declined by 3.8 percent against a 9.9 percent by 3.8 percent on average between the First Half of increase in the same period of 2006. Total spending, as 2007 (H1-07) and the same period in 2006. Key macro- measured by the volume of cleared checks, declined economic indicators, such as the primary balance (-1.3 by 4 percent in real terms in the First Half of 2007, percent of GDP in 2006) and the debt ratio (178 percent compared to an increase of 10 percent in 2006. As of GDP in 2006), have not improved. The pressure to such, cleared checks have increased by 53 percent in spend has been strong, and nominal public expenditures real terms during the Q3-07. For the first nine months, increased by 11 percent during the first nine months of cleared checks rose by 11.2 percent in real terms. 2007 (year on year basis). Fortunately, their impact was Tourism suffered a setback in the first half of 2007, moderated by buoyant domestic revenue collection dur- with a 14.3 percent decline in the number of passen- ing the same period (21.4 percent increase). However, gers arriving at Beirut Airport. However, over eight debt dynamics continued to be worrisome, because of months, arrivals rose by 13.6 percent. Public spending high fiscal deficits and slow-disbursing external sup- was the most dynamic component of domestic absorp- port. On a positive note, inflation was moderate with tion: primary public expenditures increased by 27 the Consumer Price Index (CPI) rising by about 3.7 percent in the first nine months of 2007 compared to percent (year on year basis), while the financial system the same period in 2006. A portion of this increase is, remained resilient. however accounted for by post-hostilities reconstruc- tion and recovery spending that was financed by exter- Poor economic conditions have added urgency to the nal grants . CPI inflation so far has been moderate in Government's reform efforts. The ongoing reform 2007, estimated at 3.7 percent, also reflecting the slow program aims to balance fiscal measures needed for pace of economic activity. stabilization with structural measures needed for higher growth. Despite the current politically charged environ- Figure 1. BdL Coincident Indicator ment, the reform momentum has been maintained with initial steps focusing on power, social sector and public financial management reforms. Overall implementa- tion of the program has been supported by a monitor- ing, evaluation and coordination mechanism. In paral- lel, discussions are underway with Paris III donors to finalize the terms of the financial assistance pledges totaling US$7.6 billion. To date, the finalization has been completed for only US$3.4 billion of the pledges, which comprise about US$1.3 billion budget support, US$1.1 billion project lending, US$0.7 billion private sector support and US$0.3 billion technical or in-kind assistance. However, further significant progress in the implementation of reforms and the acceleration of dis- bursement of donor funds requires a durable political Source: Central Bank of Lebanon (BdL). settlement that has not yet materialized. 1 Primary public expenditures historically accounted for Real Sector Developments 15 percent of domestic absorption. Public expenditures during the first nine months of 2007 include US$605 million Indirect economic indicators point to a mixed per- reconstruction and recovery spending from the July 2006 formance in economic activity during the first nine hostilities, which are financed by foreign grants. 10 Third/Fourth Quarter 2007 A nearly four-month conflict in the Nahr el-Bared ref- Figure 2. Cumulative Public Deficit in Millions ugee camp led to enormous loss of life, property and of US$ ­ First Nine Months of the Year economic activity. The conflict in Nahr el-Bared broke out on May 20, 2007, and lasted for 105 days, killing at least 430 people and wounding hundreds of others, many of whom were disabled. The region directly hit by the con- flict included the camp (31,000 inhabitants) and the sur- rounding six municipalities (20,000 inhabitants). Prelimi- nary estimates show total asset losses of about US$160 million. Many small enterprises were totally or partially destroyed. The health and education infrastructure was severely damaged, with three hospitals and four clinics requiringeitherreconstructionorextensiverepair,andover 15 schools, mainly kindergarten, destroyed or damaged. The destruction of public buildings (community centers, etc.) represented the second largest loss after the housing sector. Other infrastructure services, like water supply, electricity and telecommunications were less affected. Source: Ministry of Finance and World Bank staff calculations. The first nine months of 2007 saw a rise in both expenditures and revenues. The fiscal deficit reached US$1.8 billion compared to US$1.98 billion in the international oil prices and preservation of the implicit same period of 2006 (see Figure 2). The primary surplus cap on oil prices.2 increased to US$574 million compared to US$127 mil- lion in cumulative terms as of September 2006. Total Debt dynamics continue to be a source of concern. Gross expenditures, excluding recovery and reconstruction public debt reached US$41.4 billion by end-May 2007, expenditures (US$605 million or 8.9 percent of the increasing by 2.5 percent over end-2006, when the debt total), increased by 11 percent reflecting a combination was already at 178 percent of GDP. The stock of debt was of a 13.9 percent rise in debt service and a 9.2 percent reduced to US$39.8 billion in June 2007 through the retire- increase in non-debt expenditures. The increase in debt ment of about US$2 billion equivalent public debt, using the servicereflectedrisingdebtstock(by1.3percentbetween surplus on the gold valuation account of BdL. Since then, September 2006 and September 2007) and rising aver- the stock of debt increased to reach US$40.6 billion in Sep- age interest rates on debt instruments. The increase in tember 2007. Most of the debt increase occurred in BdL's primary expenditures, on the other hand, underlined portfolio, with the increased reliance on the Central Bank to the significant increase in transfers to the Electricite finance fiscal deficit in the Third Quarter of the year. Hence, du Liban (EdL), which jumped from US$598 million despite the debt write off in June 2007,3 BdL's holdings of in cumulative terms in September 2006 to US$756 mil- public debt stood at 19.9 percent of the total debt in Sep- lion in September 2007. On a positive note, cumulative tember 2007 compared to 19.6 percent at end-2006. The revenues - excluding foreign grants for reconstruction average maturity of domestic debt declined to 1.47 years and recovery (US$605 million) - increased by 21.4 per- in H1-07 from 1.61 years in December 2006, and the aver- cent as of end September 2007, largely due to rising age weighted interest rate increased to 8.67 percent in Sep- receipts from telecommunications operations, customs tember 2007, from 8.59 percent in December 2006. On the and Value Added Tax (VAT). Petroleum tax receipts other hand, both interest rates and maturities on foreign cur- have also risen sharply, but are likely to be less buoy- rency debt increased during the same period. This reflected ant in the Last Quarter of the year given the increase in the re-issuance of maturing US$1 billion Eurobonds4 in 3 2 The Government introduced an implicit cap on domestic In June, the Central Bank retired US$2 billion worth of oil prices three years ago by compensating for the rise in public debt from its portfolio using the surplus on the gold international oil prices through a decline in excises on oil valuation account. products. With the decline in international oil prices by 4 The US$1 billion Eurobonds had a maturity of two 3.8 percent in the First Half of 2007 (year-on-year), excise years and an interest rate of 6.5 percent. The re-issuance is revenues increased automatically. Elimination of the cap in a composed of two parts: a US$569 million with a maturity way to allow excise revenues to return to their pre-cap levels of one year and a 6.375 percent interest rate; the remainder, in 2007 is one of the monitorable triggers under the IMF's US$431 million, with a maturity of 14 years and an 8.25 current EPCA program. percent interest rate. Third/Fourth Quarter 2007 11 February 2007 at higher maturities (seven years) and higher Third Quarter, based on data available for July and interest rates (7.18 percent) . Some relief was provided by August, imports increased by 140 percent compared to the disbursement of a US$300 million soft loan from the the same period in 2006. This is due to the base effect United Arab Emirates (at 2.5 percent) and the restructur- of the July conflict in 2006 when trade was virtually ing of US$500 million of Eurobonds held by Malaysia to interrupted. Overall increase in imports reached 28 obtain higher maturities and lower interest rates (down from percent over eight months. Similarly, exports of goods 5.85 percent on average to 3.75 percent). increased by 20 percent in Q1-07 but then declined by 12 percent in Q2-07 due to a major reduction in the Disbursements of Paris III pledges were slower than export of precious metals. In the months of July and expected. To date, only about half of the total US$7.6 August, exports increased by 131 percent. Over eight billion pledged has been allocated (US$3.4 billion), of months, the overall increase in exports reached 17.3 which only a fraction has been disbursed (see Figure 3). percent. The trade-in-goods deficit for the first eight months of the year rose to US$5.81 billion compared to US$4.43 billion in the same period of 2006. Exports of Figure 3. Public Debt in Billions of US$ ­ services followed the same pattern as exports of goods: September 2006 the arrival of passengers at Beirut Airport declined by 14.3 percent of in H1-07 over the same period in 2006 then doubled in July and August compared to the same period in 2006. Over the eight-month period, passen- ger arrivals increased by 13.6 percent. More broadly, net foreign assets increased by only US$580 mil- lion in the first nine months of 2007 compared to an increase of US$2.25 billion over the first nine months of 2006 (see Figure 4). This suggests that net exports of services, remittances, transfers and capital inflows remained stable at US$7.2 billion in cumulative terms between September 2006 and September 2007 despite the interruption of services and transfer flows during the 2006 conflict. BdL's gross foreign reserves slightly increased to US$10.3 billion in September 2007 from Source: Ministry of Finance and World Bank US$10.2 billion in December 2006 (see Figure 5). staff calculations. Figure 4. Change in Net Foreign Assets External Accounts (US$ Million) External transactions reflect the slow recovery in economic activity, the unstable political/security environment and the base effect of the July 2006 conflict. Imports of goods increased by 15 percent in Q1-07 and then only by 2 percent in Q2-07. In the 5 The Association of Banks in Lebanon (ABL) publishes a monthly estimation of the average maturity and interest rate of Lebanon's public debt. The average maturity of foreign currency debt reached 6.4 years In December 2006, and then increased slightly to 6.43 years in May 2007. Since June 2007, the ABL is performing a new calculation of the average maturity taking into account "that Eurobonds issued in the context of the Paris-II Conference are redeemable in 20 semiannual payments starting from year six after the issue date (i.e starting 2008)"--source: ABL, Lebanese Treasury Securities, June 2007. According to this new calculation, the Source: Central Bank of Lebanon (BdL) average maturity of Eurobonds is 5.31 years, a figure that cannot be compared with the earlier data. 12 Third/Fourth Quarter 2007 Domestic and foreign currency interest rate move- Figure 5. Gross Reserves of BdL ments diverged. The average interest rate on US Dollar (US$ Billion) deposits increased by 20 basis points between end-2006 and September 2007, while that on Lebanese Pound- denominated deposits declined by 35 basis points. This reflected, in part, increased BdL financing to the Gov- ernment by US$2.2 billion between end-2006 and Sep- tember 2007. This exceeds the financing requirement for the fiscal deficit with part of the Central Bank financing helping in rolling over maturing TBs from other debt holders. This policy helped keep interest rates on the Government's Lebanese Pound borrowing low.7 The dollarization of deposits increased to 76.5 percent in September 2007, from 76.2 percent at end-2006. Source: Central Bank of Lebanon (BdL) Financial Sector Developments The financial sector showed resilience to political/ economic uncertainties. Broad money supply (M3)6 increased by 9.5 percent as of end-September 2007 over end-December 2006, compared to a 3.1 percent increase registered during the same period last year. The most dynamic component of Money Supply was resident deposits, with those in foreign currency increasing by 10.6 percent and those in domestic currency increasing by 6.6 percent. Lending to the private sector increased, reflecting refinancing schemes to help clients who suf- fered from the summer-2006 hostilities. 7 If the financing were to come from commercial banks, this would have increased pressure on bank's resources in Lebanese Pound, and banks would have had to increase depositors' rate in Lebanese Pound. Consequently, they 6 M3 equals money in circulation in Lebanese Pounds would have asked for higher remuneration on Lebanese plus deposits in Lebanese Pounds, plus deposits in foreign Pound-denominated Treasury Bills, which would have currencies. increased public debt service. Third/Fourth Quarter 2007 13 Regulations and Growth: How to Reform the Investment Climate in Lebanon Lebanon's investment climate reformers can simplify Emirates. While in Saudi Arabia a trader needs to sub- regulations, facilitate the property registration process, mit five documents to be able to import goods, seven are strengthen investor protections and reduce the cost and required in Lebanon. Time to export and import could time of the export and import processes to make the be considerably reduced by extending hours of opera- country more attractive to local and foreign investors. tion at customs, allowing pre-arrival customs clearance and reducing free demurrage time. Of 178 world economies surveyed in the recent Doing Business Report 2008, Lebanon ranked 85th. Lebanon Business regulation reforms are needed in Lebanon. was placed 132nd in terms of ease of starting a business, In fact, to start a business, an entrepreneur needs to pay 113th when dealing with licenses, 121st in enforcing con- an initial minimum capital equivalent to 60.4 percent of tracts and 83rd where investor protection is concerned. Gross National Income (GNI) per capita. In addition, the entrepreneur has to wait 25 days and pay 5.9 per- However, the ease of doing business ranking does not cent of property value to register a property. This could tell the entire story. The indicator is limited in scope, possibly be made easier if time limits were enforced at covering only business regulations. It does not account the Land Registry and Urban Planning Authority. More- for a country's proximity to large markets, the quality of over, making registration fees fixed instead of based on its infrastructure services, the security of property from a percentage of the property value, and combining them theft and looting, the transparency of government pro- all into one fee for the entire registration process could curement, macroeconomic conditions or the underlying eliminate bribes and cut total property registration fees. strength of institutions. Still, a high ranking on the scale means that the government has created a regulatory When it comes to protecting investors, Lebanese environment conducive to operating a business. shareholders are stuck between a rock and a hard place. The law restricts a shareholder plaintiff's ability Lebanon is impressively ahead of other countries to hold directors liable for self dealing or if the trans- in terms of paying taxes ­ where it ranks within the action was unfair, oppressive or prejudicial to minority first 20th percentile in the world. Positive and negative shareholders. It is also not easy for shareholders to hold credit data on both firms and individuals are made pub- a Chief Executive Officer or a Board of Directors liable lic. The public credit registry distributes more than two- for damage to the company. It is even more challenging year-old historical credit information. Data on all loans for the shareholder plaintiffs to sue directly or deriva- below 1 percent of income per capita also are available, tively for damage a transaction has caused to a company. and the law allows borrowers to inspect their data in the Lebanon could enhance its rank on the investor protec- public credit registry at any time. Moreover, any type tions index by following its neighbors' trend reforming of asset may be used as collateral. During reorganiza- some of the requirements of its Commercial Code. First, tion, secured creditors' claims are exempted from any it could change the Commercial Code to make it require automatic stay on enforcement. This means that secured directors to pay the damages to the company and repay creditors are able to seize their collateral when a debtor the profit made from this type of transaction. Second, the enters reorganization; there is no "automatic stay" or law could also make directors liable for misusing and "asset freeze" imposed by the court. In addition, the law deviating from the tasks assigned to them after ensuring authorizes parties to agree on out-of-court enforcement that the Commercial Code states clear directors' tasks by contract. and subject directors to duties of care and loyalty. Estab- lishing information systems in the courts also could But the laws and bureaucratic procedures in public facilitate the commercial contracts enforcement process, institutions compound the effects of complex regula- which currently takes 721 days to be completed. Making tions. It takes a trader 27 days to complete export formal- it easier to sue directors, allowing shareholders to open ities, and 38 days to fulfill import ones. In comparison, company books for inspection and regulating approved it takes only 13 days for both cases in the United Arab related-party transactions are all ways of better protect- ing investors in Lebanon. 14 Third/Fourth Quarter 2007 Reforms go beyond the fixes that improve the rank- established a new private credit bureau that will soon ings on any world-wide accepted indicator. Indeed, be making it easier for borrowers to get credit. equity returns are highest in countries that are reform- ing the most (Figure 1). With emerging markets aggres- Other notable investment climate reforms have been sively improving their business regulations, there has initiated in the MENA region. These reforms could hardly been a better time to invest. enhance economic growth, if implemented properly, in Lebanon. For instance, SaudiArabia eliminated the min- The Middle East and North Africa saw 25 reforms imum capital requirement of 1,057 percent of income including three negative changes--in 11 of its econo- per capita and reduced the days needed for company mies. Lebanon undertook no reforms related to facilitat- start-up from 39 to 15. It also sped up trade, reducing the ing business regulations (according to Doing Business number of documents required for importing and cutting database) during 2006/2007. the time needed for handling at ports and terminals by two days for both imports and exports. Figure 1. Shareholders benefit from reform The Lebanese Government can do some quick win 3-year shareholder return (%) reforms. These are reforms that can be implemented by Ministerial signatures, surmounting the challenging political situation and paralyzed legislative institutions. A Ministerial signature can, for example, fasten the property registration process and reduce time needed to obtain a construction license. * The interpretations and conclusions expressed in this article are those of the author and do not necessarily reflect the view of the World Bank or the governments Number of reforms, 2003-2006 and staff it represents. Source: Doing Business database, Morgan Stanley Capital International data For more information, contact Mr. Jamal I. Hai- dar, Private Sector Development Consultant, Lebanon can learn from its neighboring countries. jhaidar@worldbank.org. Saudi Arabia and Egypt lead the MENA region in terms of reforming the investment climate. Egypt outpaced To order the Doing Business 2008 report, please other reformers worldwide and in MENA in making refer to the Recent World Bank publications sec- it easier to do business in 2006-2007. Saudi Arabia tion of Update on page 24. eliminated the minimum capital requirement. Saudi entrepre¬neurs once had to set aside US$124,464 ­ the fifth largest minimum capital requirement in the world. New business owners can now put that capital to work immediately-hiring staff, renting office space and mar- keting new products. Egypt cut the minimum capital required to start a business, from 50,000 Egyptian Pounds to just 1,000 and halved the time and cost of start-up. It reduced fees for registering property from 3 percent of the property value to a low, fixed amount. It eased the bureaucracy that builders face in getting construction permits. It launched a new one-stop shop for traders at Egyptian ports, cutting the time to import by seven days and the time to export by five. And, it Third/Fourth Quarter 2007 15 News, Recent and Upcoming Activities Smooth Transition as Management Changes in MENA Take Effect Joseph P. Saba, long-serving veteran According to Ms. Gressani, of theWorld Bank's Middle East and Larbi's top priorities in his new North Africa (MENA) Department, assignment are to (i) develop and has handed over management of the implement strategies and pro- institution's work programs in Iran, grams to help the five countries Iraq, Jordan, Lebanon and Syria to meet their development priori- new Country Director Hedi Larbi, a ties, lead the Bank's dialogue and former Sector Manager and equally maintain strong partnerships; (ii) acclaimed expert on the region. provide leadership to the country teams and ensure effective functioning of the country MENA Vice President Daniela Gressani said the senior management team; and (iii) be a strong contributor to management changes were effective December 1, the Regional Leadership Team. 2007. Mr. Larbi was selected to this position through the Mr. Saba was named Director, Technical Coopera- Bank-wide competitive managerial selection process. tion Department (MNATD) in the MENA region. Ms. Gressani identified Mr. Saba's three top priori- The outgoing Director, whose tenure experienced bouts ties in his new position as: (i) increasing the quality of political and social turbulence beyond the Bank's and responsiveness to the clients' needs of fee-based mandate and control, escorted Mr. Larbi on a familiar- advisory services; (ii) strengthening the partnership ization trip to the region in November 2007 to ensure a between the Bank and the six member countries of smooth transition for both the staff and for the clients the Gulf Coordination Council; and (iii) sharing the and stakeholders at large. experiences and coordinating with similar initiatives in other regions. In his departure statement, Mr. Saba told the staff that he was "certain you are in good hands with Hedi and A U.S. national, Mr. Saba joined the Bank in 1991 wish him the very best." as a Senior Private Sector Development Specialist in the Trade and Finance Division of the Energy, Mining Mr. Larbi paid tribute to Mr. Saba's accomplishments. "I and Transport Department in the ECA/MNA Region. wanted to express my deep appreciation for your com- He has since held various positions, his most recent mitment, professional competence, high moral integrity, assignment being Country Director for Iran, Iraq, Jor- and excellence you brought to the MENA region in gen- dan, Lebanon, and Syria. eral and to the Mashreq countries in particular." Mr. Saba's successor as Director for Iran, Iraq, Jordan, Mr. Larbi thanked his predecessor for "the coaching Lebanon and Syria will be based in Beirut, a relocation and mentoring you have been extending to me and for of the position that highlight's the Bank-wide decen- your consistent willingness to go well beyond what was tralization process. necessary and expected during this transition period." A Tunisian national, Mr. Larbi joined the Bank in 1993 as a Transport Planner in the infrastructure division of the West Central Africa Department. He has since held various positions, with his most recent assignment being Sector Manager in MENA's Sustainable Devel- opment department. 16 Third/Fourth Quarter 2007 World Bank Concludes Youth Entrepreneurship Competition The World Bank Group has concluded this year's The competition, which was organized jointly by the Youth Entrepreneur Competition with the selection International Bank for Reconstruction and Development of three projects for cash awards totaling US$1,500 (IBRD), commonly known as the World Bank, and its each. The awards were distributed on September 18, sister organization, the International Finance Corpora- 2007, during a ceremony hosted by the Chamber of tion (IFC), is a pilot project designed to enhance the Commerce, Industry and Agriculture of Beirut and ability of Lebanese youth to capitalize on individual ini- Mount Lebanon tiatives and creativity to develop entrepreneurial skills. The winning projects were: In a statement to the audience, the World Bank Country · Freelance Outsourcing for Training Experience Manager for Lebanon, Demba Ba, said Lebanon's youth and Recruitment, authored by Edmond Ramly; "give a whole new meaning to entrepreneurship." · The Lebanese Biodiesel Initiative by Sherif Mak- tabi; and "Whether at home or in the Diaspora, Lebanese entre- preneurs, especially young entrepreneurs, have time · P & V Eco Holidays by Anthony Beshara. and again displayed unwavering resilience in the face The winners were selected from a group of about 50 of challenges.You have displayed creativity and innova- applicants. Additionally, 10 semifinalists were recog- tion across five continents," he said. nized for their dedication and pursuit of excellence in entrepreneurship. With additional funding from FedEx, the semifinalists were given token cash awards of between US$110 and US$270. GOL Adopts Proxy Means Testing in Social Reform The Government of Lebanon has decided to introduce The introduction of PMT is stipulated in the US$1 mil- a targeting mechanism to its aspired-for comprehensive lion World Bank Grant for the Emergency Social Protec- social safety net, and has requested the World Bank's tion Implementation Support Project (ESPISP). Accord- assistance in developing Proxy Means Testing (PMT) ing to Component 2, the Project will support the: (i) to improve the efficiency and effectiveness of Govern- development of a Proxy Means tTesting (PMT) target- ment interventions. ing formula; (ii) development of an operational manual for the new targeting mechanism; (iii) development of A World Bank mission visited Lebanon in September an information management system; and (iv) piloting of 2007 for dialogue with the Government and a work- the targeting mechanism. shop on PMT, which is widely used in developing countries to target social assistance programs, which Implementation of targeting will ultimately result in a aim to reduce poverty and improve the inclusiveness of national database of poor and vulnerable households in vulnerable communities. Lebanon. Third/Fourth Quarter 2007 17 INTERVIEW: Nadir Mohammed, Director, Strategy and Operations in the Middle East and North Africa The World Bank's Middle East and transfer and economic and sector work. Our ultimate North Africa (MENA) Department has objective, as a regional team, is to improve the qual- appointed Nadir Mohammed Director ity of the World Bank's lending operations and support for Strategy and Operations. other departments in doing so by relying on the expe- rience we have in financial management and procure- Mr. Mohammed, a Sudanese national, ment services, environmental and social safeguards and joined the Bank in December 1998 as finally maintaining operational quality standards set by Country Economist in the Middle East the institution. and North Africa Social and Development Economics Department. He has since held various positions in dif- As we move ahead, we will intensify our efforts on ferent departments. His most recent assignment was results and outcome monitoring of projects to ensure Country Manager for Albania. Prior to joining the World that any program supported by the World Bank receives Bank, Mr. Mohammed worked with the African and the the attention it merits with regards to finance-related Islamic Development Banks. aspects as well as to the knowledge we can share with our clients. Building country systems is one way of In his new post, Mr. Mohammed's three top priorities will ensuring this support is sustainable. It is indeed a mea- be: (i) advise the Regional Management Team on key cor- sure of the development effectiveness that we are aiming porate, regional and cross-cutting issues; (ii) work closely to achieve. We are also seeking more partnerships with with the other members of the Regional Management other donors to leverage additional resources and reduce Team to strengthen the Bank's effectiveness in delivering transaction costs. Achieving sustainability will rely on results for our clients at the country and regional levels; ensuring a degree of consistency and relevance of our and (iii) provide strategic direction and effective manage- collective assistance and policy advice, as a donor com- ment to the Client Services Department to deliver high munity, to development priorities in the region. quality policy and technical support to the Region. The combination of better quality, ensuring the fiduciary Update is pleased to share with its readers the text of a aspects of lending and that resources go to their intended recent interview with Mr. Mohammed as he assumes his purposes, harmonization with other donors, improving post: the consistency of our policy dialogue and advice are all ways of raising the development effectiveness of our Q: What are some of your initial impressions as you initiatives. rejoin the World Bank's Middle East and North Africa Region? Q: What are the challenges for MENA over the next couple of years? A: I am very happy to be back to the MENA region. I feel like coming back home after a very fruitful and enrich- A: The main priorities for the MENA region are politi- ing assignment in ECA. I consider myself a MENA cal stability and sustainable economic development. The citizen. As you know, my country Sudan is a member of region has been effected by a number of conflict situa- the Arab League, with strong cultural, political and eco- tions and we hope that stability will prevail in a region nomic links across with the MENA region. Events and that is as geographically, socially and economically developments in MENA also impact on my country. In interconnected as MENA. The impact of what happens addition, I lived, worked and studied in many countries in one country is felt instantly in others. across the region (Saudi Arabia, Egypt, Yemen, Leba- non, Tunisia, Djibouti, etc). It will be critical over the next few years to sustain the good momentum of economic reforms which is taking Q: How do you define "Development Effectiveness"? place in MENA countries at varying speed. Creating an environment that is conducive to foreign direct invest- A:As an institution, we strive to deliver the best services ment will reduce the persistently high unemployment to our clients through project financing, knowledge rates prevailing across the region. On the other hand, education reform remains a priority for the region 18 Third/Fourth Quarter 2007 to ensure that the outcomes of the education systems Q: To what extent is the World Bank engaging with match the needs of the jobs created by the private public constituencies (beyond governments) across the sector. Finally, good governance, gender equity and region? sustainability of water resources also feature among the key regional priorities. We certainly expect that A: The World Bank's MENA strategy is based on strong the World Bank Group's programs will meet some of partnerships and is guided by our clients and partners. the needs for assistance while addressing this set of A crucial part of how we do business is engaging with regional priorities. civil society actors including non-governmental organi- zations, parliamentarians, private sector agents, donor Q: How does the World Bank balance between the representatives and political parties. These entities have needs of low income and middle income countries significant knowledge and experiences that we can build across the region? on to enhance the development effectiveness of World Bank-financed projects and policy advice. This is also A: Countries in the region are predominantly middle an important aspect in addressing the demand for good income countries. The only countries in MENA that governance through existing and newly formed groups are eligible for financing from the International Devel- including water user associations, parents' councils in opment Association (IDA) are Yemen and Djibouti. In schools, fishery management organizations, other pro- both, we hope to provide the needed support through fessional, vocational and private sector networks. IDA credits and grants and a range of knowledge products. Consulting these groups helps the World Bank teams in designing projects and evaluating their impact. We have Middle-Income Countries (MICs) in MENA face simi- consulted widely with important development actors in lar challenges that other MICs across the world con- the region while preparing Country Assistance Strate- tinue to address. In these countries, the World Bank's gies. I believe that the more we engage with civil soci- role is to find the most effective way of responding ety organization, the more relevant we are to countries to the increasing need for financial assistance and the in the region. high demand for knowledge. In consultation with our clients and partners, we developed a menu of options As a global development institution, we place high that can suit the diverse needs taking advantage of the emphasis on outreach activities to disseminate better institution's global experience to enhance our product our economic and sector reports and studies. There is diversity, quality and flexibility while ensuring a quick certainly value in disseminating this analytical work response. The World Bank Group applies the same beyond policy making circles to universities, think global culture and standards to MENA as it does to tanks and across professional networks. In the MENA other regions across the world. region, the World Bank outreach team has launched Public Information Centers which provide access to Q: What are the key features of the World Bank strat- non-governmental actors to learn more about our work egy in the region? and offer the opportunity to deepen our engagement on the grounds of transparency and in making development A: The World Bank strategy for the MENA region was everybody's business. presented to our Board of Directors earlier this year. The strategy reflects three economic transitions: the first is from public dominance to a more active private sec- tor base; the second is from closed economies to more open economies that can play an active role in a rapidly globalizing world, and finally from an oil-dominated economic base to a more diversified and stable econ- omy. While going through these transitions, specific challenges remain to be addressed such as governance, water, gender and high unemployment. An update of the strategy is currently underway to ensure refinements of the strategy in light of recent economic, political and social developments in the region. Third/Fourth Quarter 2007 19 Bank Group Operations IBRD Ongoing Projects the basic institutional framework that is currently lack- ing, and to support critical investments needed to maxi- The current IBRD portfolio in Lebanon consists of mize the efficiency of existing urban transport infra- 11 active projects for a total commitment amount of structure. The Project was approved in June 2002. US$435.58 million, of which US$286.81 million had been disbursed by December 31, 2007. Cultural Heritage and Urban Development Project (CHUD) (US$31.5 million). The Project will finance Education Development Project (EDP) (US$44.6 mil- site conservation, enhancement investments, associated lion). This Project is designed to support the Govern- urban infrastructure improvements in selected sites and ment's efforts to enhance the capacity of the Ministry provide technical assistance to strengthen the capacity of Education to function as an effective manager of the of the Directorate General of Antiquities, Ministry of education sector and to restore the credibility of the Tourism and targeted municipalities in cultural heritage Public Education System. The Project was approved in preservation and tourism development. The Project was March 2000. approved in April 2003. First Municipal Infrastructure Project (FMIP-I) First Municipal Infrastructure Project Supplemen- (US$80.0 million). This Project aims to address tal (Trust Fund US$30 million). This Grant aims to: urgent municipal works while setting the stage for the (i) restore basic services and rebuild municipal infra- gradual assumption of responsibility for municipal structure in the municipalities and villages hardest services at the local level. The Project was approved hit during the summer 2006 hostilities; and (ii) pro- in June 2002. vide technical assistance to, and build the capacity of, municipalities to mitigate the impact of the hostilities Community Development Project (CDP) (US$20.0 on municipal finances. million). This Project is designed to raise living stan- dards in targeted poorer communities, and to raise eco- Beka'a Emergency Water Supply and Modernization nomic activity levels in such communities by investing Project (Trust Fund US15 million). The objectives of in grass-roots social and small infrastructure activities the Project are to: (i) operate and maintain water and and in employment creation. The Project was approved waste water facilities in the Beka'a Region, (ii) under- in June 2001. take rehabilitation works using the operations and the investment fund to be made available by the govern- Ba'albeckWater andWastewater Project (US$43.5 mil- ment, and (iii) bill and collect on behalf of the Regional lion). The major development objectives of the Project Water Utility for all its customers. include: (i) improving the access of satisfactory water supply and wastewater services to the region's residents; Emergency Power Sector Reform Capacity Rein- (ii) introducing appropriate sector reforms ­ particularly, forcement Project (Trust Fund US$5 million). The the development and strengthening of the capacity of the objectives are to accelerate the design and implemen- existing Ba'albeck Hermel Water and Irrigation Author- tation of reforms by enhancing the capacity in the ity and, once it is established, the Beka'a Regional Ministry of Energy and Water (MEOW), the Electric- Water Authority; and (iii) involving the private sector in ite du Liban (EdL) and the Higher Council for Priva- the operation and maintenance of water and wastewa- tization (HCP). ter facilities by preparing for a Management Contractor (MC) through a lease or concession contract that would Reform Implementation Development Policy Loan I secure the long-term financial needs for sector invest- (US$100 million). The Project will help advance criti- ments. The Project was approved in June 2002. cal reforms of the Government's economic reform pro- gram, with a particular emphasis on energy, business Urban Transport Development Project (UTDP) environment and social protection to reduce the need to (US$65.0 million). The Project's objectives are to pro- subsidies and improve the investment and employment vide the city of Beirut and the Greater Beirut Area with environment. 20 Third/Fourth Quarter 2007 Emergency Social Protection Implementation Support Social Security Fund (NSSF), the Ministry of SocialAffairs Project (Trust Fund US$1 million). The project will help (MOSA), and the Ministry of Health (MOH). accelerate and improve the quality of the Government's socialsectorreformpackagethroughtheprovisionofimple- For more information on projects, please visit: mentation support and capacity building at the National http://www.worldbank.org/lb. Commitments and Disbursements as of December 31, 2007 Approval Loan Amount Closing Project Name Year Amount Disbursed Date US$ Million Education Development 2000 44.58 29.96 Dec. 2007 First Municipal Infrastructure 2000 80.00 69.43 June 2008 Community Development 2001 20.00 18.47 Feb. 2008 Ba'albeck Water and Wastewater 2002 43.53 18.74 Sep. 2008 Urban Transport Development 2002 65.00 34.40 June 2009 Cultural Heritage and Urban Development 2003 31.50 12.81 Dec. 2009 First Municipal Infrastructure Project Supplemental 2006 30.00 2.09 Dec. 2009 Beka'a Emergency Water Supply and Modernization 2007 15.00 0.25 May 2010 Emergency Power Sector Reform Capacity Reinforcement 2007 5.00 0.57 June 2009 Reform Implementation Development Policy Loan 2007 100.00 100.00 Jan. 2009 Emergency Social Protection Implementation Support 2007 1.00 0.09 Apr. 2009 Total 435.58 286.81 IBRD Ongoing Grants Post Conflict Fund (PCF) Grants Institutional Development Fund (IDF) Grants Mechanism for National Reconstruction (US$1.25 million). The Grant supports the establish- National HIV/AIDS Monitoring and Evaluation ment by the Government of Lebanon of a system to (US$350,000). This Program aims to support the devel- manage and monitor the reconstruction funding in an opment of an integrated national monitoring and evalu- effective and transparent manner, promoting interna- ation (epidemiologic and programmatic) system to tional standards and good practice. enhance the capacity to plan, manage and implement HIV/AIDS prevention, care and treatment, and mitiga- Rapid Social and LivelihoodsAssessment (US$99,000). tion programs throughout the Lebanese territory. The objective of the Grant is to feed into the strategic planning processes related to post-hostilities reconstruc- Supporting the Judiciary System in the Enforcement of tion. As such, it is expected to identify social policies Environmental Legislation (US$327,000). This program and interventions to help those affected by the hostilities aims to strengthen the capacity of the Ministry of Justice and vulnerable segments of the Lebanese society. The and the Ministry of Environment in judicial enforcement Grant aims to fill a serious information gap on liveli- in environmental affairs and is implemented by UNDP. hoods and social conditions. DevelopingCapacityBuildingToolsforSustainableGov- ernance (US$338,000). The objective of the Project is to build the capacity of the Institute of Finance in developing and providing a sustainable source of high quality, spe- cialized training in Public Financial Management (PFM), project management and leadership building through the development of new curricula and case studies and by delivering high quality training and capacity building. Third/Fourth Quarter 2007 21 IFC Projects in Lebanon Microfinance: IFC sponsored a roundtable program to match international experts in microfinance in conflict Since the hostilities in the summer of 2006, the Interna- areas with Lebanese microfinance institutions to help tional Finance Corporation (IFC) has focused its activi- them develop techniques to recover from the hostilities, ties on supporting the recovery of the private sector, and and is working with the WBG's CGAP to carry out a in continuing technical assistance efforts with the Gov- market and administrative review of the sector. ernment of Lebanon to ease the administrative burden on the private sector. Administrative Barriers Survey: The joint World Bank/ IFC Foreign Investment Advisory Services Group has At the Paris III conference, IFC pledged between finalized a survey of administrative barriers in Lebanon US$250-US$275 million to support Lebanon's private to identify reforms necessary to improve Lebanon's busi- sector. In March 2007, IFC became the first multina- ness environment. Discussions are now underway on a tional institution to disburse to the private sector. IFC's program to implement the survey recommendations. Executive Vice President signed the first of a series of agreements with banks to provide access to finance for Business Enabling Environment: IFC continues its Small and Medium Enterprises (SME) directly or indi- work on a Technical Assistance Agreement with the rectly affected by the 2006 conflict. In June 2007, addi- Ministry of Economy and Trade to assist in the reform tional agreements were concluded with banks, including and streamlining of the business registration process. the first transaction on a Guarantee Facility to support This Program will take approximately one year and will SME's. This Guarantee Facility is supported by the tackle one of the issues in which Lebanon performed World Bank through a trust fund for the facility. IFC has most poorly in the Doing Business Survey. also financed Admic, a large retail group, and SABIS an educational company. Corporate Governance: In partnership with the Asso- ciation of Lebanese Bankers, IFC undertook a compre- In addition to its traditional lending activities, IFC's hensive review of Corporate Governance practices in the Private Enterprise Partnership for the Middle East and Banking Sector in Lebanon. Now, IFC is rolling out an North Africa (PEP-MENA), a US$100 million, donor- extended Corporate Governance program that will focus financed Technical Assistance facility, has focused on a on raising standards in businesses across all sectors. number of areas relating to recovery from the hostilities and to implementing administrative reform. Gender: As part of a wider regional program, IFC recently published a survey of barriers to women entre- Privatization: In June 2007, IFC signed an agreement preneurs in Lebanon. This survey examines current with the Government of Lebanon to assist in the devel- practices in Lebanon compared to other countries in the opment of an additional 450mw of capacity in the power region. sector, to be provided by the private sector. MIGA in Lebanon Lebanon has been a member of the Multilateral Invest- project in Benin involving the installation of a new GSM ment Guarantee Agency (MIGA) since 1994. Over the mobile telephone network. Lebanon is one of the lowest past decade, MIGA has received more than 20 prelimi- teledensity countries in the world. In fiscal year 2003, nary applications from investors in Austria, Canada, MIGA issued US$56 million in Guarantees to Invest- France, Luxembourg, Saudi Arabia and Spain for invest- com's investment in Spacetel, Syria's second mobile ments in Lebanon in the finance, infrastructure, telecom- telephone network. Also, Lebanese investors have sub- munications and tourism sectors. mitted preliminary applications in the finance, infra- structure and manufacturing sectors for investments in In addition, the Lebanese investor community has Cote d'Ivoire, Ghana, Sierra Leone, Gambia, Guinea become increasingly interested in MIGA's ability to pro- and Syria. Eligible investors include those from MIGA- vide non-commercial risk coverage for their investments member countries investing in Lebanon, Lebanese in other developing countries. In fiscal year 2002, MIGA nationals repatriating funds for investments in Lebanon, issued US$8.1 million in guarantees to Investcom, as well as Lebanese investors investing in developing a Lebanese-owned company, for a telecommunications countries, including the Middle East region. 22 Third/Fourth Quarter 2007 The Investment Development Authority of Lebanon MIGA's online investment promotion services (www. (IDAL), Lebanon's Investment Promotion Agency, has fdixchange.com and www.ipanet.net) feature 130 docu- submitted to MIGA a Needs Assessment request. MIGA ments on investment opportunities and the related legal performed the Needs Assessment in March 2006. The and regulatory environments in Lebanon. Needs Assessment will benchmark IDAL's investment promotion capacity relative to international best prac- tices and recommend steps to improve IDAL's ability to attract FDI into Lebanon. Third/Fourth Quarter 2007 23 Recent World Bank Publications World Development Report 2008: Agriculture for slipped. The indicators are used to analyze economic Development (ISBN: 0-8213-6807-9, ISBN-13: 978- outcomes and identify what reforms have worked, where 0-8213-6807-7 SKU: 16807). The world's demand for and why. Doing Business 2008 focuses on how complex food is expected to double within the next 50 years, business regulations dampen investment, growth and job while the natural resources that sustain agriculture will creation in all businesses, and especially opportunities become increasingly scarce, degraded and vulnerable to for women entrepreneurs. the effects of climate change. In many poor countries, agriculture accounts for at least 40 percent of GDP and Employment and Shared Growth: Rethinking the 80 percent of employment. At the same time, about 70 Role of Labor Mobility for Development (ISBN-13: percent of the world's poor live in rural areas and most 978-0-8213-7107-7). The vast majority of the poor depend on agriculture for their livelihoods. get their income from work, and access to productive employment is often the only way out of poverty. How- World Development Report 2008 seeks to assess where, ever, the understanding of policy makers and their advi- when and how agriculture can be an effective instrument sors on the mechanisms that make employment an effec- for economic development, especially development that tive transmission channel between growth and poverty favors the poor. It examines several broad questions: reduction remains somewhat limited. This Report brings together contributions from top specialists on a selected · How has agriculture changed in developing coun- number of priority issues in this area. Using examples tries in the past 20 years? What are the important from all continents, it discusses why multi-segmented new challenges and opportunities for agriculture? labor markets offer a good starting point for analysis; what role the informal sector plays for employment; how · Which new sources of agricultural growth can be worker mobility affects income; whether self-employ- captured cost effectively, in particular in poor coun- ment is an engine of growth; and how firm dynamics tries with large agricultural sectors as in Africa? affect both growth and employment through job creation · How can agricultural growth be made more effec- and destruction. tive for poverty reduction? · How can governments facilitate the transition of Minimum Wages and Social Policy: Lessons from large populations out of agriculture, without sim- Developing Countries (ISBN-13: 978-0-8213-7011- ply transferring the burden of rural poverty to 7 SKU: 17011). Offering evidence from both detailed urban areas? individual country studies and homogenized statistics across the Latin American and Caribbean region, this · How can the natural resource endowment for agri- book examines the impact of the minimum wage on culture be protected? How can agriculture's nega- wages, employment, poverty, income distribution and tive environmental effects be contained?This year's government budgets in the context of a large informal report marks the 30th year the World Bank has been sector and predominantly unskilled workforces. publishing the World Development Report. Exploring Lebanon's Growth Prospects (WPS4332). Doing Business 2008 (ISBN: 0-8213-7231-9, ISBN-13: This Paper attempts to identify Lebanon's greatest con- 978-0-8213-7231-9 SKU: 17231). Regulations affect- straints to economic growth, following a growth diag- ing 10 areas of everyday business are measured: starting nosis approach. It concludes that fiscal imbalances and a business, dealing with licenses, employing workers, barriers to entry are most binding on long-term growth. registering property, getting credit, protecting investors, Macroeconomic imbalances and related perceived risks paying taxes, trading across borders, enforcing contracts affect the nature of investment decisions in Lebanon, in and closing a business. Doing Business 2008 updates all favor of liquid instruments rather than longer-term pro- 10 sets of indicators, ranks countries on their overall ductive investments. Further, many barriers to entry dis- ease of doing business and analyzes reforms to business courage agents from investing in a number of markets: regulation ­ identifying which countries are improving legal impediments to competition, corruption and a set their business environment the most and which ones of fiscal incentives favoring the allocation of resources 24 Third/Fourth Quarter 2007 to non-tradable sectors, where potential demand and In addition to this critical groundwork around the world, investment opportunities are scarcer. In turn, using a various parts of the World Bank Group are involved in steady-state computable general equilibrium model, the activities ranging from conducting economic research paper assesses the long-term growth impact of a selected and analysis to providing financial and advisory services set of policy reforms envisaged to lift such constraints. to governments and private enterprises. These activi- Results suggest that 1 to 2 percentage points of addi- ties reflect the emphasis the institution places on shar- tional GDP growth per year could be gained through ing development knowledge, which is gleaned not only public expenditure reform, greater domestic competi- from decades of experience. tion, and tax harmonization. This completely revised and updated Second Edition Moving Out of Poverty (Volume 1): Cross-Disciplin- provides an accessible and straightforward overview of ary Perspectives on Mobility (World Bank ISBN: the World Bank Group's history, organization, mission 0-8213-6991-1, ISBN-13: 978-0-8213-6991-3 SKU: and purpose.Additionally, for those wishing to delve fur- 16991). This book brings together the latest thinking ther into subjects of particular interest, the book guides about poverty dynamics from diverse analytic traditions. readers to sources containing more detailed information, While covering a vast body of conceptual and empirical including annual reports, Web sites, publications and e- knowledge about economic and social mobility, it takes mail addresses for various departments. It also provides the reader on compelling journeys of multigenerational information on how to work for, or do business with, the accounts of three villages in Kanartaka, India, twelve World Bank. years in the life of a street child in Burkina Faso and much more. Leading development practitioners and A good introduction for anyone interested in under- scholars from the fields of anthropology, economics, standing what the World Bank Group does and how it political science and sociology critically examine the lit- does it, this book shows readers who want to learn more erature from their disciplines and contribute new frame- where to begin. works and evidence from their own works. International Migration, Economic Development & The Moving Out of Poverty Series launched in 2007 is Policy (World Bank ISBN:0-8213-6935-0, ISBN-13: under the editorial direction of Deepa Narayan, Senior 978-0-8213-6935-7 SKU: 16935). International migra- Advisor of the World Bank and former director of the tion has become a central element of international rela- pathbreaking Voices of the Poor Series. It features the tions and global integration due to its rapidly increasing results of new comparative research across more than 500 economic, social and cultural impact in both source and communities in 15 countries to understand how and why destination countries.This book provides new evidence on peoplemoveoutofpoverty,andpresentsotherworkwhich the impact of migration and remittances on several devel- builds on interdisciplinary and contextually grounded opment indicators, including innovative thinking about understandings of growth and poverty reduction. the nexus between migration and birth rates. In addition, the book identifies the effect of host country policies on A Guide to the World Bank, Second Edition (ISBN: migration flows, examines the determinants of return and 0-8213-6694-7, ISBN-13: 978-0-8213-6694-3 SKU: repeat migration, and explores the degree of success of 16694) The World Bank Group is a vital source of return migrants upon return to their country of origin. financial and technical assistance to developing coun- tries around the world. Its focus is on helping the poor- More Than a Pretty Picture: Using Poverty Maps to est people in the poorest countries by using its financial Design Better Policies and Interventions (ISBN: 0- resources, staff and extensive experience to aid countries 8213-6931-8, ISBN-13: 978-0-8213-6931-9 SKU: 16931). in reducing poverty, increasing economic growth and The allocation of resources and the design of policies tai- improving quality of life. In partnership with more than lored to local-level conditions require highly disaggregated 100 developing countries, the Bank Group is striving to information. Data on poverty at the local level is typically improve health and education, fight corruption, boost not available because most household surveys are not rep- agricultural support, build roads and ports, and protect resentative past the regional level. This Volume aims to the environment. Other projects are aimed at rebuilding promote the effective use of Small Area Estimation Pov- war-torn countries or regions, providing basic services erty Maps in policy making. It presents the range of poli- such as access to clean water, and encouraging invest- cies and interventions which have been informed by pov- ments that create jobs. erty maps, focusing on the political economy of poverty maps and the key elements to their effective use by policy Third/Fourth Quarter 2007 25 makers.TheVolumealsolooksatthefutureofpovertymaps tion and Communication Technology (ICT) is rapidly in terms of new techniques and new areas of application. evolving, changing rich and poor societies alike. It has become a powerful tool for participating in the global Setting Standards for Communication and Gover- economy and for offering new opportunities for devel- nance: The Example of Infrastructure Projects (ISBN: opment efforts. ICT can and should advance economic 0-8213-7169-X, ISBN-13: 978-0-8213-7169-5 SKU: growth and reduce poverty in developing countries. It has 17169). This title outlines a number of practical initiatives been 20 years since the first telephone operator was priva- to strengthen the role of development communication in tized, a little over 10 since the World Wide Web emerged, infrastructure projects. The authors aim to facilitate bet- and 5 since the telecommunications bubble burst. How ter quality projects and to build consensus on the type of have the ICT sector and its role in development evolved? governance reforms needed to fight corruption, drawing What have we learned? How can we move forward? on the experience of development agencies like the World Bank and Transparency International. Information and Communications for Development 2006: Global Trends and Policies contains lessons from It starts by characterizing corruption vulnerabilities in both developed and developing countries. It examines infrastructure and proceeds to illustrate where communi- the roles of the public and private sectors, identifying cation has added value on a number of recent projects, the challenges and the benefits of adopting and expand- both in regard to making the projects more sustainable ing ICT use. The report first assesses topics essential to and by incorporating anti-corruption measures into proj- building an information society, including investment, ect preparation and implementation. It draws on examples access, diffusion, and country policies and strategies. It of mainly World Bank-supported projects from the road, then introduces the new World Bank ICT At-a-Glance transport, power and water sectors in different governance tables for 144 economies, which show the most recent contexts. Five standard-setting initiatives are then out- national data on key indicators of ICT development. lined, which focus on promoting best practice to better The tables enable assessments and comparisons both integrate development communication into the project over time and across economies, so they help gauge ICT cycles of World Bank-supported infrastructure projects. capacity, performance, and progress. How to Build M&E Systems to Support Better Assessing what has worked, what hasn't, and why, this Government (ISBN: 0-8213-7191-6, ISBN-13: 978- report is an invaluable guide for understanding how to 0-8213-7191-6 SKU: 17191). A growing number of capture the benefits of ICT around the world. governments are working to improve their performance by creating systems to measure and help them under- Performance Accountability and Combating Corrup- stand their performance. These systems for Monitoring tion (ISBN: 978-0-8213-6941-8). This volume provides and Evaluation (M&E) are used to measure the quan- an analytical framework and operational approaches tity, quality and targeting of the goods and services - the needed for the implementation of results-based account- outputs - that the state provides and to measure the out- ability. The volume makes a major contribution to the comes and impacts resulting from these outputs. These literature on public management and evaluation. Major systems are also a vehicle to facilitate understanding of subject areas covered in this book include: performance the causes of good and poor performance. basedaccountability,e-government,legalandinstitutional framework to hold government to account; fighting cor- The studies of this volume start by focusing on exactly ruption; external accountability and the role of supreme what monitoring and evaluation has to offer to govern- audit institutions on detecting fraud and corruption. ments, then focuses on the experience of several coun- tries that have succeeded in building a well function- Ordering World Bank Publications ing government. It analyzes the lessons from building Phone: (001) 800-645-7247 or (001) 703-661-1580 government M&E systems in developing and developed countries, and at the end maps out those issues where Fax: (001) 703-661-1501 international experience with government M&E sys- On-Line: http://publications.worldbank.org/ecommerce tems is not well understood or well documented. E-Mail: books@worldbank.org Information and Communications for Development Research and working papers are also available in 2006: Global Trends and Policies (ISBN: 0-8213-6346- electronic format free of charge at: 8, ISBN-13: 978-0-8213-6346-1 SKU: 16346). Informa- http://econ.worldbank.org/ 26 Third/Fourth Quarter 2007